Hi Hobbers!

I have discussed the idea of silver sales online with management of a few producers and its not as simple as it sounds. Yes, FR is able to market effectively on their own website right now, and due to the shortage of retail silver people are willing to pay a premium above spot today. Last year we did not hear about that, and I suspect FR was losing money on their sales. If you have to choose between FR silver rounds, or recognized and stamped silver bullion from current smelters, there is no choice - you go with the regular, recognized bullion because dealers are going to pay you a higher price for that bullion down the road if you choose to sell someday. I do not know if recognized bullion will ever be plentifull in the market again, but I am still not willing to consider small production coinage as anything more than novelty value right now. I write this as a silver bug, and not out of spite. I have owned FR for many years and am glad they are currently getting a lot of attention for their program.

The reason these programs will not make money is because the juniors do not produce refined silver. They produce a concentrate or a dore product, which is then sold to a smelter to be refined to triple-nine purity. The producers get a sharp discount in value for their output compared to the spot price. So they are buying refined silver at above market price to produce these products, and realize a net loss on a per-ounce basis compared to the revenues they book for their sales. Next, they pay a fee to create a stamp for their products and to mint the coins and bars. Add in that they face storage, transportation, and insurance costs for these products, plus they pay people to run the program. All of these costs probably come in very close to the premium above spot that the FR silver sells for.

The people who have looked into this sort of thing with serious research have told me that they would lose money if they tried it. It still has value as a promotional medium, and the FR logo is imprinted on every coin. I own one of them in my collection actually. But it is not going to solve the problems that companies face in terms of the discount they are paid for production from the smelters, and that is one of the biggest factors that investors overlook. Maybe a few companies are actually producing with costs below $9 per ounce, but they actually realize far less than $9 per ounce for their production and that is why almost no silver juniors are making money right now.

cheers!

mike